A recent LinkedIn discussion shows why there are people who should never go into business or give business advice.
A “self-described Entrepreneur” posted about a disturbing trend. He was correct, it is disturbing, but nothing new.
The trend was predatory “VC’s,” who offer limited dollars for exorbitant equity. These swindles are nothing new, as usurious loans or bad equity deals have been around since time immemorial.
My advice was “never go into a deal (whether equity or debt) without having an attorney and financial professional look at it. If you do then the unwise decision is on you, the founder.”
That’s when I got push-back. “Founders can’t afford lawyers or financial professionals” (I’ll just use professionals for both groups), was what the discussion group was telling me.
More sage advice
My answer is that if a founder doesn’t do due diligence, it’s their fault. Part of due diligence is talking with your own professionals. And if you can’t afford them, there are incubators or pro bono professionals who will assist.
More push-back. They quote a “well known” VC/PE” person who is extremely knowledgeable, that he heard one founder’s deal dragged out by the investor until the investor changed the deal at the last minute, to an egregious equity percentage and performance.
My last reply on the subject, because there was mention of the availability of pro bono services, was that a simple Google search for “pro bono small business lawyers” gave me 19.3M results. “I’m sure you can find someone local with that many possibilities.”
Going into business costs money. Anyone who is willing to give you money for little or even market rate needs an investigation. Failure to do due diligence is only one person’s fault, the founders.
Owning a business is taking credit for the great decisions and the stupid ones!